IDEAS home Printed from https://ideas.repec.org/p/fip/fednsr/304.html
   My bibliography  Save this paper

Buybacks in Treasury cash and debt management

Author

Listed:
  • Kenneth D. Garbade
  • Matthew Rutherford

Abstract

This paper examines the use of buybacks in Treasury cash and debt management. We review the mechanics and results of the buyback operations conducted in 2000-01, during a time of budget surpluses, and assess the prospective use of buybacks in the absence of a surplus. Possible future applications include (i) managing the liquidity of the new-issue markets when deficits are declining (by allowing Treasury officials to postpone a decision to discontinue a series without also being compelled to shrink new-issue sizes); (ii) actively promoting the liquidity of the new-issue markets (by repurchasing outstanding debt on a regular basis and funding the purchases with larger offerings of new debt); (iii) limiting the accumulation of large Treasury cash balances (for example, in the second half of April and early May, when many taxpayers make final payments of taxes on income earned in the prior year); and (iv) smoothing week-to-week fluctuations in Treasury bill offerings.

Suggested Citation

  • Kenneth D. Garbade & Matthew Rutherford, 2007. "Buybacks in Treasury cash and debt management," Staff Reports 304, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:304
    as

    Download full text from publisher

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr304.html
    Download Restriction: no
    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr304.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Duffee, Gregory R, 1996. "Idiosyncratic Variation of Treasury Bill Yields," Journal of Finance, American Finance Association, vol. 51(2), pages 527-551, June.
    2. Warren B. Hrung, 2007. "An examination of Treasury term investment interest rates," Economic Policy Review, Federal Reserve Bank of New York, vol. 13(Mar), pages 19-32.
    3. Michael J. Fleming & Kenneth D. Garbade, 2005. "Explaining settlement fails," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Sep).
    4. Duffie, Darrell, 1996. "Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June.
    5. Warga, Arthur, 1992. "Bond Returns, Liquidity, and Missing Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(4), pages 605-617, December.
    6. Simon, David P., 1994. "Further evidence on segmentation in the treasury bill market," Journal of Banking & Finance, Elsevier, vol. 18(1), pages 139-151, January.
    7. Mark Fisher, 2002. "Special repo rates: an introduction," Economic Review, Federal Reserve Bank of Atlanta, vol. 87(Q2), pages 27-43.
    8. Amihud, Yakov & Mendelson, Haim, 1991. "Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-1425, September.
    9. Simon, David P., 1991. "Segmentation in the Treasury Bill Market: Evidence from Cash Management Bills," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(1), pages 97-108, March.
    10. Kenneth Barbade & Paul Bennett & John Kambhu, 2000. "Enhancing the liquidity of U.S. Treasury securities in an era of surpluses," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 89-119.
    11. Kenneth D. Garbade, 2007. "The emergence of \\"regular and predictable\\" as a Treasury debt management strategy," Economic Policy Review, Federal Reserve Bank of New York, vol. 13(Mar), pages 53-71.
    12. Kamara, Avraham, 1994. "Liquidity, Taxes, and Short-Term Treasury Yields," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(3), pages 403-417, September.
    13. Boudoukh, Jacob & Whitelaw, Robert F, 1993. "Liquidity as a Choice Variable: A Lesson from the Japanese Government Bond Market," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 265-292.
    14. Kenneth D. Garbade & John Kambhu, 2005. "Why is the U.S. Treasury contemplating becoming a lender of last resort for Treasury securities?," Staff Reports 223, Federal Reserve Bank of New York.
    15. Joseph A. Cherian & Eric Jacquier & Robert A. Jarrow, 2004. "A Model of the Convenience Yields in On-the-Run Treasuries," Review of Derivatives Research, Springer, vol. 7(2), pages 79-97, August.
    16. Kenneth D. Garbade & John C. Partlan & Paul J. Santoro, 2004. "Recent innovations in Treasury cash management," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Nov).
    17. Paul Bennett & Kenneth Garbade & John Kambhu, 1999. "Enhancing the Liquidity of U.S. Treasury Securities in an Era of Surpluses," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-083, New York University, Leonard N. Stern School of Business-.
    18. Michael J. Fleming & Kenneth D. Garbade, 2004. "Repurchase agreements with negative interest rates," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Apr).
    19. N/A, 1996. "Note:," Foreign Trade Review, , vol. 31(1-2), pages 1-1, January.
    20. Krishnamurthy, Arvind, 2002. "The bond/old-bond spread," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 463-506.
    21. Frank M. Keane, 1996. "Repo rate patterns for new Treasury notes," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Sep).
    22. Michael J. Fleming & Kenneth D. Garbade, 2002. "When the back office moved to the front burner: settlement fails in the treasury market after 9/11," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(Nov), pages 35-57.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Basil Guggenheim & Mario Meichle & Thomas Nellen, 2019. "Confederation debt management since 1970," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-23, December.
    2. Vicente, José Valentim Machado & Guillen, Osmani Teixeira de Carvalho, 2013. "Do inflation-linked bonds contain information about future inflation?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(2), June.
    3. Robin Greenwood & Annette Vissing-Jorgensen, 2018. "The Impact of Pensions and Insurance on Global Yield Curves," Harvard Business School Working Papers 18-109, Harvard Business School, revised Dec 2018.
    4. Dimitri Vayanos & Jean‐Luc Vila, 2021. "A Preferred‐Habitat Model of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 89(1), pages 77-112, January.
    5. Ethan Struby & Michael F. Connolly, 2023. "Treasury Buybacks, the Fed's Portfolio, and Local Supply," Working Papers 2023-02, Carleton College, Department of Economics.
    6. W. Arrata & B. Nguyen, 2017. "Price impact of bond supply shocks: Evidence from the Eurosystem's asset purchase program," Working papers 623, Banque de France.
    7. Piotr Bartkiewicz, 2021. "The evolution of the Polish government bond market," Public Sector Economics, Institute of Public Finance, vol. 45(1), pages 149-169.
    8. Dong Lou & Hongjun Yan & Jinfan Zhang, 2013. "Anticipated and Repeated Shocks in Liquid Markets," The Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1891-1912.
    9. Taeyoung Doh, 2010. "The efficacy of large-scale asset purchases at the zero lower bound," Economic Review, Federal Reserve Bank of Kansas City, vol. 95(Q II), pages 5-34.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fleming, Michael J, 2002. "Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 707-735, August.
    2. Paul Bennett & Kenneth Garbade & John Kambhu, 1999. "Enhancing the Liquidity of U.S. Treasury Securities in an Era of Surpluses," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-083, New York University, Leonard N. Stern School of Business-.
    3. Fleming, Michael J. & Garbade, Kenneth D., 2007. "Dealer behavior in the specials market for US Treasury securities," Journal of Financial Intermediation, Elsevier, vol. 16(2), pages 204-228, April.
    4. Michael J. Fleming, 2001. "Financial market implications of the federal debt paydown," Staff Reports 120, Federal Reserve Bank of New York.
    5. Kenneth Barbade & Paul Bennett & John Kambhu, 2000. "Enhancing the liquidity of U.S. Treasury securities in an era of surpluses," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 89-119.
    6. Michael J. Fleming & Kenneth D. Garbade, 2005. "Explaining settlement fails," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Sep).
    7. Graveline, Jeremy J. & McBrady, Matthew R., 2011. "Who makes on-the-run Treasuries special?," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 620-632, October.
    8. Kenneth D. Garbade & John Kambhu, 2005. "Why is the U.S. Treasury contemplating becoming a lender of last resort for Treasury securities?," Staff Reports 223, Federal Reserve Bank of New York.
    9. Dong Lou & Hongjun Yan & Jinfan Zhang, 2013. "Anticipated and Repeated Shocks in Liquid Markets," The Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1891-1912.
    10. Dimitri Vayanos & Pierre‐Olivier Weill, 2008. "A Search‐Based Theory of the On‐the‐Run Phenomenon," Journal of Finance, American Finance Association, vol. 63(3), pages 1361-1398, June.
    11. Lewis, Kurt F. & Longstaff, Francis A. & Petrasek, Lubomir, 2021. "Asset mispricing," Journal of Financial Economics, Elsevier, vol. 141(3), pages 981-1006.
    12. Stefania D'Amico & Roger Fan & Yuriy Kitsul, 2013. "The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors," Working Paper Series WP-2013-22, Federal Reserve Bank of Chicago.
    13. Livingston, Miles & Wu, Yanbin & Zhou, Lei, 2019. "The decline in idiosyncratic values of US Treasury securities," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    14. Corradin, Stefano & Maddaloni, Angela, 2020. "The importance of being special: Repo markets during the crisis," Journal of Financial Economics, Elsevier, vol. 137(2), pages 392-429.
    15. Ahn, Jungkyu, 2024. "Options illiquidity in an over-the-counter market," International Review of Financial Analysis, Elsevier, vol. 94(C).
    16. Michael J. Fleming & Kenneth D. Garbade, 2004. "Repurchase agreements with negative interest rates," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Apr).
    17. Michael J. Fleming, 2003. "Measuring treasury market liquidity," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-108.
    18. David Goldreich & Bernd Hanke & Purnendu Nath, 2005. "The Price of Future Liquidity: Time-Varying Liquidity in the U.S. Treasury Market," Review of Finance, Springer, vol. 9(1), pages 1-32, March.
    19. Mark Grinblatt, 2002. "An Analytic Solution for Interest Rate Swap Spreads," Yale School of Management Working Papers ysm39, Yale School of Management.
    20. Díaz, Antonio & Escribano, Ana, 2017. "Liquidity measures throughout the lifetime of the U.S. Treasury bond," Journal of Financial Markets, Elsevier, vol. 33(C), pages 42-74.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:304. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gabriella Bucciarelli (email available below). General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.